BUMI SERPONG DAMAI (BSDE IJ): Just a minor dip in the roads November 1, 2017 952

Result Highlights

  • 9M17 earnings was in-line but NPAT beat our expectation as net margin rose to 39.5%.
  • Laggard 3Q17 overall performance after sizeable revenue recognition from land plot sales in 2Q17.
  • Marketing sales strategy shift as company to focus on cheaper housing in 4Q17.


In-line 9M17 results as margins improved

BSDE recorded solid earnings of IDR 5.83 tn (+36.2% YoY) in 9M17 with bottom line jumped by 99.69% to IDR 2.3 tn (vs. IDR 1.158 tn in 9M16). Revenue is mainly in-line with our estimate with 76.01% run-rate but NPAT beat ours and consensus’ expectation with 95.54% and 90.02% run-rate, respectively. Furthermore, net margin improved significantly to 39.5% (from 27.2% in 9M16). We believe this is due to lower interest expense after loan restructuring and an increase in operating efficiency that augmented operating profit growth by 49.96% YoY. In terms of QoQ achievement, BSDE recorded NPAT of IDR 292 bn (-77.1% YoY) on 3Q17 and total revenue of IDR 1.6 tn (-34.4% YoY). In our view, laggard performance in 3Q17 was to be expected after sizeable revenue recognition from land plot sales in 2Q17.

Balance sheet mildly affected by one-off transaction

As of 9M17, BSDE held IDR 4.5tn in cash and equivalents, down 15.1% from last quarter. This is likely caused by the premium BSDE paid for purchasing Menara Sinarmas MSIG on September 12th, 2017. The purchase value was USD 107.5 mn (IDR 1.4 tn), with a premium around USD 15 mn (IDR 200 bn). Due to this reason, Its net debt position stood at IDR 2.7 tn, rose 8.27% from last quarter. The decrease in cash and equivalents has affected the net gearing level which increased to 10.2% vs. 9.6% in 2Q17.

Balance sheet mildly affected by one-off transaction

9 months 2017 pre-sales achieved 66% of annual target which set on IDR 7.2 tn while residential pre-sales made amounting to IDR 1.4 tn has contributed 29% of full year target. The contribution from residential sales dropped drastically compared to last year of 63%. BSDE has launched a program called “price lock” in October 2017, which involves 20% discount for cash payment for several selected properties that came from existing inventories. We expect the impact would be mild as only 7% of its customers opt to pay by cash while the rest prefer mortgage or in-house instalments.

Rating and Valuation

We maintain our BUY recommendation and 12 month forward target price of IDR 2,110. Our RNAV-based target price implies a 2018F P/E of 14.1x and reflects a 5% perpetual growth rate, 7.62% market risk premium, 6.82% risk-free rate, 1.24 beta, and 15.1% WACC. BSDE is currently trading at an attractive valuation of 10.3x 2018F P/E (1 Standard deviation below 3-year average) and 55.2% discount to RNAV.

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